SHILLONG, July 2: A key economic indicator of financial health of the state, debt to Gross State Domestic Product Ratio of Meghalaya is showing signs of easing, a Reserve Bank of India report pointed out.
According to the Reserve Bank of India’s (RBI) State Finances: A study of Budgets, which throws light on the fiscal prudence of the state, showed that Meghalaya’s total outstanding liabilities in terms of loans and other external borrowings are estimated to decline to 39.1 per cent of Gross State Domestic Product (GSDP) as on March 31, 2026, from the revised estimate of 39.8 per cent a year earlier.
However, the state’s borrowings have continued to increase in absolute terms, the decline in the debt-to-GSDP ratio suggests that Meghalaya’s economy is growing at a faster pace than its debt.
The improvement is seen as a positive indicator for a state that remains heavily dependent on central assistance to finance capital-intensive development projects.
Notably, Meghalaya’s debt burden had risen to as high as 43 per cent of GSDP during the COVID-19 period, reflecting the fiscal pressures created by increased capital expenditure, incidental spending and revenue shortfalls.
RBI data show that the state’s outstanding liabilities stood at 42.1 per cent of GSDP in 2021-22, increased to 42.9 per cent in 2022-23, and further to 43.2 per cent in 2023-24, before declining to 39.8 per cent in 2024-25 (Revised Estimates) and an estimated 39.1 per cent in 2025-26 (Budget Estimates).The trend suggests that although borrowings have continued to finance infrastructure and development projects, the state’s economy has expanded at a faster pace, thereby reducing the debt burden relative to GSDP.
The latest figures also underscore the lingering impact of the pandemic on Meghalaya’s finances. Before COVID-19, the state’s outstanding liabilities remained relatively stable at around 35.3-35.4 per cent of GSDP during 2018-19 and 2019-20.
However, emergency expenditure, revenue losses and increased borrowings during the pandemic pushed the ratio sharply to 43.5 per cent in 2020-21, one of the highest levels recorded by the state in recent years. Although the debt burden remained above 42 per cent for the following three years, the latest estimates suggest that Meghalaya has begun to reverse that trend.
The improvement broadly aligns with the state’s latest Budget, which projects stronger economic growth, higher revenue mobilisation and continued investment in infrastructure while keeping the fiscal deficit within the limits prescribed under the Fiscal Responsibility and Budget Management (FRBM) framework.
Economists generally regard the debt-to-GSDP ratio as a more meaningful indicator of fiscal sustainability than the absolute amount of debt, as it measures a government’s capacity to service its liabilities relative to the size of its economy.
Despite the recent improvement, Meghalaya continues to have one of the higher debt burdens among the northeastern states. According to the RBI’s Budget Estimates for 2025-26, only Arunachal Pradesh (59.8 per cent) and Nagaland (47.0 per cent) have higher debt-to-GSDP ratios than Meghalaya. The state’s estimated ratio of 39.1 per cent is almost identical to Manipur (39.2 per cent) and remains higher than Sikkim (38.6 per cent), Mizoram (33.2 per cent), Tripura (30.5 per cent) and Assam (27.9 per cent).
Meghalaya’s debt burden also remains significantly above the all-state average of 29.2 per cent, highlighting the need for continued fiscal prudence even as the ratio shows signs of improvement.
Chief Minister Conrad K. Sangma, while presenting the 2025-26 Budget, projected total revenue receipts of Rs 25,591.35 crore against revenue expenditure of Rs 20,556.21 crore, resulting in a revenue surplus of Rs 5,035.14 crore.
While the improving debt-to-GSDP ratio is likely to reassure policymakers and investors, fiscal experts caution that sustaining the decline will depend on maintaining robust economic growth, improving tax and non-tax revenue collections, and ensuring that future borrowings are directed towards productive capital investments capable of generating long-term economic returns.
